The purpose of a debt consolidation company is two-fold. First, it helps you work out a plan to consolidate and pay off your debt. Second, it negotiates the consolidation terms with your existing creditors on your behalf. Before you decide to work with a debt consolidation to regain control of finances, weigh the pros and cons to make sure it is the right financial situation for you.

Does It Work for You

The primary advantage of working with a debt consolidation company is it provides you with a professional to do the majority of the planning and up-front portion of debt consolidation for you. The debt-consolidation company representative reviews all of your finances with you, negotiates the debts with your existing creditors and works out a payment plan, where you may one payment for all of your outstanding debt.

Disciplines Payment Habits

Many who seek debt consolidation do so because they are not able to manage their finances on their own. When finances spiral out of control, many consumers make late payments to creditors or stop making payments altogether. Working with a debt consolidation company helps you to get back on track because you only have to make one payment each month—to the debt consolidation company. The debt consolidation company then doles out the payments to each creditor from the payment you gave. Working with a debt consolidation company can give you a sense of accountability.

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Doesn&amp;rsquo;t Change Spending Habits

Jenny McCune for Bankrate.com says that debt consolidation treats a symptom, but doesn’t fix the problem, which is your spending habits. Many consumers who use debt consolidation companies to help them get their finances in order end up finding themselves back in debt because they did not learn how to stop spending or spend wisely.

Prolongs Payoffs

Although some debt consolidation companies are able to negotiate a better interest rate, others simply negotiate a longer term in which to pay off the debt. Stretching the amount of time you have to repay the debt means you end up paying more in the long-run than before you did the debt consolidation. Not all debt consolidation companies are reputable, so make sure you check out the references and reputation of the company before working with it. Also, make sure you understand if the term for repayment has simply been extended rather than you’re truly paying a lower interest rate.

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About the Author

Kristie Lorette started writing professionally in 1996. She earned her Bachelor of Science degree in marketing and multinational business from Florida State University and a Master of Business Administration from Nova Southeastern University. Her work has appeared online at Bill Savings, Money Smart Life and Mortgage Loan.